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Are the 457 visa reforms an illusion act?

Anna Patty
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There was tellingly little outcry from business groups as the federal government promoted itself as tightening the tap on access to global workers.

Even as the government put up a No Vacancy sign to the world's goat herders, turf growers, deer farmers, blacksmiths, wool buyers, historians, potters and sculptors some industries were breathing a sigh of relief that the crackdown on the controversial 457 scheme didn't go further.

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Turnbull ends 457 visas

Announcing it will abolish the controversial 457 visa program for temporary skilled migrants, the Turnbull government has adopted a new "Australians First" approach to skilled migration. (Malcolm Turnbull/Facebook)

The lobby group representing restaurants and caterers, for example, was relieved to learn that chefs and cooks would remain on the list of skilled jobs that could still be filled using the new-look temporary work visas after the federal government's announced this week that 457 visas would be "abolished".

Prime Minister Malcolm Turnbull says the move would ensure "Australian jobs and Australian values are first".

But is this really the big shake-up and transformation of the temporary labour migration system the Prime Minister's press conference and Facebook announcement earlier this week led us to believe?

There are 95,000 holders of 457 visas in Australia which are issued for four years but have been a path to permanent migration.

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Turnbull says a reduction in the visa intake would help ensure that "Australian jobs are filled by Australians" and that foreign workers are only brought in to fill critical skill gaps and not because an employer finds it easier to recruit from overseas.

That sort of rhetoric has raised scepticism about the substance of the reform. Critics argue that many of the occupations that remain on the eligible list are not areas of genuine skills shortages such as accountancy and IT systems engineers. The retention of employer-based market testing suggests exploitation of the visa system will continue. The lack of independence at arms length of government means political interference will continue to influence the shape of the skilled occupations list.

Some obscure jobs have been removed from the list prompting outrage in blindsided sectors even as mainstream employer groups largely welcomed the move. Scientists, ICT support technicians and engineers are among the 200 jobs removed. Executive recruitment will also become harder because employer-sponsored visa applicants will need to be under the age of 45 and the difficulty of gaining residency.

Under the changes, the 457 visa will be replaced with two new Temporary Skill Shortage visas – one of up to two years, with one opportunity for renewal. Another visa of up to four years can be renewed and provide a permanent residence pathway after three years. Other changes to the system include tougher English language tests and a requirement to have a tax file number.

Migration law expert Dr Joanna Howe, an Associate Professor in Law at The University of Adelaide, says the government is "talking the talk" about restoring credibility to the visa system because Australians are waking up to its problems.

"It is interesting that if this is really the radical transformation of the temporary labour migration system, why are employer groups not up in arms about restrictions? It's because the main occupations and industries which rely on temporary migrant workers haven't been pared back under this change."

Employment relations expert, Dr Chris F Wright from the University of Sydney business school agrees, describing the move as a "rebranding exercise".

"Tinkering around the edges of the 457 visa isn't going to make employers more seriously engage with the local labour force," he says.

In their research, Wright and his colleague Dr Andreea Constantin found employers were using 457 visas in the hospitality industry to overcome recruitment difficulties, which are not the same as skills shortages.

"This was especially the case in accommodation and food services and the three main occupations are cooks, cafe and restaurant managers and chefs," Wright says.

For a skills shortage to exist as distinct from a recruitment difficulty, Wright says it has to be across the labour market and not specific to a particular employer. And it has to be persistent.

Employers can respond to a skills shortage by setting higher wages, providing better career opportunities or training workers.

But in a tough business environment only 1 per cent of 1600 employers using 457 visas were prepared to address a job vacancy by increasing wages. They were more likely to recruit labour from overseas.

"Employers in hospitality were 13 times more likely to prefer 457 visa holders over similar Australian workers," Wright says.

"The scheme is designed to address shortfalls of qualified workers, but hospitality employers were just as likely to recruit 457 visa workers because they were perceived as being harder working or more loyal.

"The scheme has essentially been misused by many employers in this industry. The evidence suggests that employers, especially in hospitality, aren't prepared to improve the quality of jobs in the industry to make them more attractive to locals."

To fix the scheme workers on temporary skilled visas need to have greater capacity to switch employers and there should be an independent assessment of skills shortages, rather than taking employers at their word.

Howe supports a more independent system of labour market testing.

Left in the hands of employers, labour market testing can amount to a job advertisement. More genuine labour market testing considers the wording of the advertisement and the wages and conditions offered.

Howe's research reviewed international best practice in migration policy and found a more credible system in the UK where an independent committee of economic and legal experts are responsible for labour market testing. The testing is used to determine if wages and conditions and public investment in an occupation need to increase before overseas labour is used to fill employment gaps.

When Turnbull says he was implementing the recommendations of a 2014 review of the 457 visa system led by John Azarias, he stepped around one of its "core" recommendations.

The Azarias review recommended the replacement of the ministerial advisory council on skilled migration (MACSM) with a new tripartite ministerial advisory council to report to government on skilled migration issues and that the new advisory body should be supported by labour market data.

Michaelia Cash reconstituted the MACSM when she was the assistant minister for immigration in 2015.

Howe says this did not create a tripartite body capable of providing independent and evidence-based advice to government. She says the eight-member committee was "stacked" with six people (now five) with an employer background or favourable view towards greater levels of skilled migration, one trade union member, ACTU president Ged Kearney and one independent member, Azarias.

Author of the 2014 Azarias review, John Azarias.

Author of the 2014 Azarias review, John Azarias. Photo: Daniel Munoz

Kearney resigned her position on Friday citing the government's failure to consult with MACSM over its new visa policy, rendering the advisory body irrelevant.

"I would have made it clear that the occupations that remain on the list, which include roof tilers, carpenters, joiners, chefs, cooks midwives, nurses and real estate agents, do not accurately reflect the genuine labour shortages in Australia," Kearney says.

"The changes to the skilled migration visa system are only relevant to one in 10 visa-holders so actually do not protect jobs for local workers.

"The visa system is being rorted and workers are being exploited every day but the government only cares about its political survival."

Another "core" recommendation of the Azarias review was to acknowledge, as the OECD had pointed out, that employer-conducted labour market testing is not "fully reliable", and in the Australian context has proven ineffective and "that the current legislative requirement for labour market testing be abolished".

Azarias, a non-executive director and former senior partner with Deloitte Australia, told Fairfax Media his 2014 recommendation that employer-based labour market testing should be abolished and was not accepted by either side of politics.

"The minister of the day made the political call to do what the government wanted," he says.

"It was not our job to do labour market testing, we made suggestions on the governance. Both the government and the opposition says no, we will keep [employer-based] labour market testing."

He says changes to the skilled occupations list announced by the government this week had provided a "better system that relies on expert advice from various government departments".

"It is a more transparent system than it was before," he says.

"The old list was not fit for immigration purposes."

Decisions on which occupations stay on the skilled occupations list are made by government based on advice from the ministerial advisory council.

The Azarias review did not recommend abolition of the 457 visa.

"The decision to abolish the 457 is probably more about political sound bite than something that needed to happen in substance," Howe says. "What they are replacing it with is something fairly similar by just tweaking the regulation on the 457 visa."

While the federal government's reforms are a "step in the right direction", Howe believes they do not go far enough because a key Azarias recommendation has been ignored.

"They retain the worst element of the 457 visa which is employer-conducted labour market testing," she says.

"The compilation of lists within the department of employment is not consistent with international best practice because it can be subject to political influence and lobbying by powerful employer groups.

"Evidence of this is that the top 29 occupations for the 457 visa have not been taken off the list and the occupations which have been taken off the list are more marginal and obscure like goat herding and deer farming."

Howe's research argues for a more accountable and transparent way of compiling skilled occupations lists using robust economic data from independent experts instead of public servants beholden to a minister and subject to political influence.

"There is such strong employer group lobbying on this that it is difficult for a government department to put a list together like that free from political influence purely on the economic data," she says.

"There are real integrity concerns around occupations like cooks and accounting and how those are being exploited under the 457 visa.

"They are still on the lists because the peak employer bodies are so powerful. For example, for the Restaurants and Catering Association it is a key issue for them being able to hire overseas cooks because they can pay them less and they provide a ready labour supply. If they have to employ locals it is a different ball game as local workers often have higher wage expectations which reduces profits for the industry."

John Hart, the chief executive of Restaurant and Catering Australia says cooks are one of the most sought after occupations in the country and the industry is facing a "gaping skills shortage". He says his organisation has successfully argued its case on policy, not politics.

RCA chief executive, John Hart.

RCA chief executive, John Hart. Photo: Mark Metcalfe

He says the Department of Employment's own projections suggest there is a 28,000 shortage of cooks between now and 2020.

"Our occupations in our industry are the highest projected employment growth of any sector in the economy," Hart says. "We need to have skilled cooks brought in from offshore to train local apprentices in the kitchen."

Australian Industry Group chief executive Innes Willox says the new approach to the skilled occupation list would help identify genuine skill shortages and guard against "often opportunistic spikes" in applications for vague or non-essential skill categories.

He says the 457 visa system was a highly valued program but misunderstandings of its use and "exaggerations of its misuse" led to it becoming a lighting rod for anti-immigration sentiments.

Ending the visa category, adding limits and more clearly defining its successor visas would return its focus to addressing persistent areas of skills shortages.

Changes to English language testing would need to be monitored to ensure they did not adversely impact on access to skilled workers in lower-skilled categories. Willox says many workplaces are multilingual and a working knowledge of English was "sufficient" in many cases to meet operational and safety requirements.

IT professionals have contacted Fairfax Media to complain they have been unable to get jobs in Australia which are filled with cheaper labour from overseas.

The Australian Population Research Institute has found that IT professionals are the largest single occupation represented in the 457 program and more than three-quarters are Indian nationals who mostly work in Sydney or Melbourne.

The study found that the proportion of IT professionals from India granted 457 visas and paid base salaries of $53,900 or less, much lower than experienced Australian IT professionals, has significantly increased.

The NSW government has also confirmed it uses people on 457 visas to fill full-time jobs following its decision to outsource ServiceFirst which looks after IT, human resources and payroll services.

With more than a quarter of 457 visas granted to people from India, particularly those working in the ICT software sector, Australia India Business Council National chair Sheba Nandkeolyar says the Prime Minister's announcement this week had "come as a surprise" and had created some uncertainty in the ICT market.

Australia India Business Council National chair Sheba Nandkeolyar.

Australia India Business Council National chair Sheba Nandkeolyar. Photo: Louie Douvis

"We are hoping that industry does not get affected because that is a very specialised skill that Australia needs," she says.

Ms Nandkeolyar says engineers, health workers and medical professionals had also contributed to addressing skills shortages in the past and she hoped these areas could continue to be supplemented.

Moves to tighten the visa scheme was welcomed. "Yes we do know that 457 visas have too many categories and probably some categories which were being misused. To that extent, the government tightening the categories within the 457 visa category is good," she says.

Migration lawyer Angela Chan, the past president of the Migration Institute of Australia, says the federal government has taken a "big stick" to the 457 visa program which represented a small proportion of temporary visa holders.

She says the existing system was working well, including effective monitoring by the Fair Work Ombudsman, but the Department of Immigration had been lax in enforcing penalties against some businesses.

She says labour market testing had been problematic for restaurants that could not find local staff to fill vacancies.

"It's not as if people haven't been advertising," she says.

Neville Roach, chair of a 1995 report that recommended the introduction of the 457 visa believes the federal government needs to return to the original purpose of a high-skilled visa program. The program was introduced in 1996 and originally focused on growth resulting from deregulation in the finance sector, the resources and construction boom and the IT revolution.

"We needed a lot of new skills very rapidly ... without the 457 visa it is hard to see how Australia would have coped," Roach says.

High vetting standards were also applied to visa sponsors, who were generally large employers, to ensure integrity in the system.

"If you did that the risk of the system being rorted was very low," Roach says.

As the visa program expanded to include a wider range of skill levels and industries, its integrity became compromised. Entry standards were relaxed and a large number of semi-skilled people and students started entering Australia on temporary visas.

The policy was brought in to cater to one type of skill entrant and instead was applied to all skills, high and low.

Sponsorship was also extended to family businesses.

Roach believes the 457 visa was not the right vehicle to bring in chefs and hairdressers. It is much harder to check skills and sponsor integrity and he agrees there is need for reform.

"I think they need to look back to the original idea. It worked exceptionally well."

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